Monday, July 04, 2011

America and the social safety net - what happens if future growth fails?

My understanding of the financing of social security, and perhaps of medicare, was that we took some of the wealth of the future to make the present better.

This can be a reasonable trade. America of 2030 ought to be much wealthier than America of 2011. Why not share the wealth -- especially as we are borrowing from our future selves just as we gave to our parents.

But what if America stops getting wealthier? Or what if that wealth is concentrated in a small slice of the population, a disproportionately powerful segmented that is disinclined to share its wealth -- and has the power to say no.

Then we have a deep problem with the way we have historically financed our social insurance.